Indies’ screen shot

Distrib biz shifts from majors to local players

The increasingly profitable business of distributing Brazilian pics at home is shifting from the hands of majors based in the country to local indie distribs, a trend that is expected to continue in the coming years.

Majors have traditionally released most of the local hits, leaving indies with pics that had little commercial potential. But last year, indies distributed six of the top 10 Brazilian features (four fully and two jointly with majors), and this year, indies Downtown and Paris jointly released the local top earner, Roberto Santucci’s “De pernas para o ar” (“Upside Down”), while indie Imagem and government-operated RioFilme distributed “Bruna Surfistinha,” the runner-up among local pics at the B.O.

“It’s still too soon to say (indie players are here to stay), but there is definitely a trend,” says Downtown prexy Bruno Wainer.

Although Columbia started to co-produce and distribute local pics as early as the mid-’90s, it wasn’t until 2002 that the majors heavily entered the sector. They were stimulated by changes in the regulation of Article 3, a federal incentive that allows majors to re-channel part of taxes on income earned abroad into the production of local films. As they invest in pics, they become co-producers and earn distribution rights.

In the past, indies did not have the coin to compete against majors for the top pics. However, they began to gain some muscle in 2006, when Brazil’s Cinema Agency (Ancine) introduced the Box Office Program (PAR), an incentive aimed exclusively at local indie distribs, based on the B.O. performance of their films.

But the real push was the introduction of Sector Fund, which began to release coin in 2009. Sector Fund was designed to boost the production and distribution of commercial Brazilian pics, offering four lines of support, two of them dedicated to local indie distribs. In the “C line,” SF backs companies in the acquisition of equity in Brazilian pic projects. Once they become co-producers of a pic, they also acquire distribution rights. Through the “D line,” distribs can get money for the P&A on Brazilian pics.

In 2009 and 2010, indies received a total of 35.8 million reals ($22.3 million) from SF’s C and D lines, and are set to receive an additional $18.7 million in the second half of this year.

At roughly the same time, Brazil’s homevideo market collapsed — and with it a good portion of the majors’ earnings — which further evened the playing field. Indies are now in a better position to fight for local hits than majors, a scenario any analyst would have dismissed a couple years ago.

“For Ancine, the existence of strong Brazilian independent distributors who have local films as their main product is a key factor for the strengthening of our market and industry,” says Ancine topper Manoel Rangel.

Most local producers are satisfied with the new market reality: “It’s different to discuss the distribution of your film with a Brazilian partner than it is with the executive of a major. The local guy has more time for you, while the majors do not have the distribution of Brazilian films as their core business,” says “Good” director Vicente Amorim, whose latest film, “Dirty Hearts,” will be released in October by Downtown.

As the only local distrib fully dedicated to Brazilian pics, Downtown is in a particularly strong position to negotiate rights for homemade fare. In 2008, Downtown and investment bank Lacan put together a Funcine, another type of local incentive, which has since invested $9.4 million in eight local features. Downtown has released five of these pics so far, while the other three are in various stages of production.

Local helmer Jose Padilha also has been instrumental, introducing an innovative model for handling Brazilian pics with his film “Elite Squad 2″: Rather than selling distribution rights, Padilha’s production company Zazen released the film, selling an impressive 11 million tickets — a record high since reliable stats became available in the country in 1970. The helmer recently announced he is negotiating to create an indie distrib with top local production companies.

According to Padilha, distribs currently “control” the bulk of the earnings for the pics they release — an arrangment he doesn’t consider fair to producers. “All I can say at this point is that a group of local producers will open a distribution company that will operate under another business model that will be much more favorable for them,” Padilha tells Variety.